Introduction to Strategic Performance Measurement Systems
Prepare a paper that outlines the major issues related to the implementation of Strategic Performance Measurement Systems (SPMSs).
The strategic performance management system is a method which create a connection between the performance of the employee and the performance of the organization in order to boost the performance of the compensation system. It aims at ensuring that all the employees working in an organization must achieve the goals and objectives set by the organization and on the contrary the organization aims at achieving the objectives which is based on the set target plans and strategic plans as well (Soltanizadeh et al., 2016).
The strategic performance management system is also called as SMPS in short. The major objectives and goals of SMPS is to concretize the connection between the performance of organization and Agency strategic plan, Organizational performance indicator and other development plans as well. It is also connected with the performance-based incentive system i.e. PBIS which include Productivity Enhancement incentive and the performance-based bonus i.e. PBB as well (Kaplan and Norton, 1995).
The SMPS is a tool which aims at evaluating the performance and creating new ways of managing the performance in the Muliti National Companies. It aims at serving and working as an evaluation strategy for in order to assess unit performance or the combined performance of an individual inside the smallest operating unit. To boost the goals of an individual performance evaluation, the management has introduced a tool of setting some criteria and standards which will match with the objectives of an individual as well as the performance of the organization. The SMPS is majorly applied on output manufacturing units and it has a major goal to measure the combined performance by focusing on the outputs by using standard units of measurement. This permits to compare and evaluate performance which will focus on both the factors i.e. productivity as well as efficiency of an individual as well as operational units. By the use of SPMS, the companies find out the actual demand to introduce tangible results which will focus on the performance at many levels with a motive to decrease the subjective factors. Each accomplishment is provided due credit and rewards by the provision of an additional objective measurement (LeRoux and Wright, 2010). This can easily be done and managed by setting similar standards for all the outputs which has been generated and converting many targets into one individual measurement. The outcome of such combination simplifies the comparison of outputs, permitting the management to focus on the effectiveness of an individual units as well as combined units and determine necessary action plans which will perform as an indicator to evaluate the overall performance of the entire unit (Micheli and Manzoni, 2010).
Objectives and Goals of SMPS
The performance-based evaluation system assists that all the employees must be accountable for the growing clientele’s satisfaction. It is dependent on the proposition that consideration of performance results should be a crucial element of the process involved in the evaluation. It is also dependent on the proposition which continued workers development and enhancement is very important role in any organization and all the employees working in an organization should be given effective support to boost their performance and create a sense of belongingness towards the goals and objectives of the organization. The main objective of the system is to determine if the employee satisfy the criteria, introduce excellence in the results, set standards to evaluate the performance of the employees, make sure that the supervisors are competitive and provide all the required resources to boost the performance of the employees (Poister, 2010).
No matter what the main business objectives and business strategy an organization focuses on, customer intimacy, optimization of latest technology or innovation, work environment practises must show and drive the behaviours in order to deliver on that goals and strategy and the consistent market positioning. Strategic alignment is an intense hands-on business redesign process in which strategic goals and objectives are aligned with the principle business purpose and the core mission and values.
There are large number of tools which are used to translate strategy into action plans. The strategy must be implemented successfully and effectively in order to create success of the organization. Those organization which are unsuccessful set an example of the failures. In another words, it can also be said that a company having a strategy does not guarantee to achieve success. The two main factors which are critical in nature that determine the success of the company are effectively formulated strategies and effective implementation of formulated strategy. There are huge number of Multi-National Companies which became success in creating the “Strategic translation” converted into the accurate measurement system which are far good enough to execute the strategies. This is just because they can communicate their direction in a more better ways, be more focused on the drivers which are critical in nature and match align their action plans and investment criteria. The growth of the effectiveness of the Multi-National Companies strategic management process can easily be controlled and managed by reducing the connection that takes place between the formulation of the strategy and its implementation within the organization (Nudurupati, Bititci, Kumar and Chan, 2011). The major issues involved and identifies for the disconnection are mentioned below.
- A clear and sound vision of the strategy is not only enough- organizational challenges in order to convert the goals and vision into action plans is very important. Even though there are many companies which have a very effective strategic plans, but they do not have accurate operating goals. So, it is very necessary for every company to have goals with action plans.
- Likewise, companies do not gather the accurate information in order to evaluate progress and growth towards their strategic goals and there are many companies which do not learn from the mistakes.
- Scarce of transformation of strategic formulation into a nonstop process which adapts to the feedback based on the performance when the strategic goals and objectives are achieved (Nooraie, 2012).
SMPS and Individual Performance Evaluation
The balanced scorecard is an accurate solution in the form of an innovative management. The Balanced Scorecard is a well proved approach and a technique to strategic management which surrounds the long-term strategy into a proper management system by the ideas of measurement (Tayler, 2010). The Balanced Scorecard converts the mission, vision and strategy of any organization into an effective tool which will communicate strategic intent and encourage and tracks the performance of the employees against the establishment of the company goals and mission. The balanced scorecard system hardens the focus and main aim of the organization towards the success by setting certain standards and objectives (Niven, 2011). This tool also measures the performance of the organization as well as employees from four major perspectives. The learning and growth idea guides and provides attention based on the overall success of the organization which also include the employees working in an organization along with its infrastructure facilities. Sufficient investment in all the areas and segments must be done to gain long term success. The enhancement of an accurate learning organization assist success in another Balanced scorecard perspective, the inner perspective. The internal perspective emphasis on the performance of the principle internal processes which runs the business. Improvement and growth in the internal processes is a major indicator of the financial success. A company vision denotes the end goal that must be achieved by every organization. A strategy is a shared and combined understanding that deals with the tactics which must be followed to achieve the desired goal. The balanced scorecard creates a medium to convert the clear vision into the standard set of objectives. The set objectives are later converted into a system of performance dimensions which communicate an energetic, forward-looking and strategic focus for the overall organization in a very effective manner (Grigoroudis, Orfanoudaki and Zopounidis, 2012).
Nevertheless, in order to convert higher processes into financial success, the organizations should initially convince their customers. The perspective of the customer reflects the business through the eyes of a customer so that the company recalls an attentive focus on the needs and demands of the customer and their satisfaction (Franco-Santos, Lucianetti and Bourne, 2012). At the end, the Financial perspective, determines the end results of that the company gives to its shareholders. Combined together, all the mentioned perspectives provide a balanced idea of the recent and future performance of the organization. Balanced Scorecard is basically used to clarify and apprise strategy, communicate strategy to all of his employees, align combined and single goals with the strategy, connect strategic goals with long term targets and yearly budget plans, analyse strategic initiatives and create periodic performance reviews in order to learn and enhance strategy. The balanced scorecard converts an organization mission and vision into a complete set of performance measures which aims at creating framework and outline for a strategic measurement and management system (Capon, Farley and Hoenig, 2012).
Necessities for the Support and Assistance of the SPMS
The main objective of SPMS is to create and enhance the effectiveness of the performance done by the team members. The manager along with the members are combined together and they work together in order to plan, monitor, evaluate and acknowledge the work and contribute to the overall achievement of the organization (Upadhaya, Munir and Blount, 2014). There are several types of tools which are commonly used in the process which ranges from traits and characteristics based or behaviour based to outcome based. Feedback is provided by both formal as well as informal communications and the feedback generated can be regular as well as irregular. A huge amount of time and energy is invested in setting the right goals and reviewing the performance of the employees and later appraising it as well. Nevertheless, things can be sometimes wrong and the mandatory effectiveness of the performance of the employees is not gained (Butler, Henderson and Raiborn, 2011). There are some main challenges which an organization faces while managing the performance of the employees which are mentioned below.
Wrong Design: The performance management system matches with the particular needs and demands of the company. It cannot be a replication of a system which is created and implemented in other company, even though a company in the similar industry or the similar business group. Powerful consultation with many stakeholders and employees of the company is very important. The trust of the user plays an important role in any system and the design can be tried out primarily on the pilot basis before it is applied on the organization. Thus, performance management must be reviewed as a continuous process for the long-term success. The design must include rewarding employees and training the poor employees in an organization (Blocher, Stout and Cokins,2010).
Lack of Integration: The performance management system must be combined together with strategic planning and HRM systems along with the culture, structure, systems and process of the organization. If, it does not take place, it will hinder the overall growth of the organization.
Absence of leadership commitment: Leadership Commitment and assistance is a mandatory factor for smooth implementation of the entire system. Leaders are responsible for driving the process and making performance management as a crucial part of the company. They are the one who monitors and evaluates the performance of the entire organization. They also review the performance cycle and rewards the employees based on their performance.
Implications Related to Strategic Alignment
Incompetence: Competence in order to use the SMPS is important because it ensures the smooth implementation of the entire system. Some of the principle skills required are defining objectives, and performance indicators, defining performance measures and providing feedback and appraisals to the employees (Bisbe and Malagueño,2012).
Thus, it can be concluded that SMPS also aims at ensuring the effectiveness of the organization and the employees by flowing institutional accountabilities on large number of levels of the company. Additionally, it also creates a link between the performance of the management and another HR system. Most important, the major complements made by SMPS is the Results-based performance management system which is undertaken by the office of the president and which connects the performance of the organization with the goals set by the society.
References
Bisbe, J. and Malagueño, R., 2012. Using strategic performance measurement systems for strategy formulation: Does it work in dynamic environments? Management Accounting Research, 23(4), pp.296-311.
Blocher, E.J., Stout, D.E. and Cokins, G., 2010. Cost management: A strategic emphasis. Includes index.
Butler, J.B., Henderson, S.C. and Raiborn, C., 2011. Sustainability and the balanced scorecard: Integrating green measures into business reporting. Management Accounting Quarterly, 12(2).
Capon, N., Farley, J.U. and Hoenig, S., 2012. Toward an integrative explanation of corporate financial performance. Springer Science & Business Media.
Franco-Santos, M., Lucianetti, L. and Bourne, M., 2012. Contemporary performance measurement systems: A review of their consequences and a framework for research. Management accounting research, 23(2), pp.79-119.
Grigoroudis, E., Orfanoudaki, E. and Zopounidis, C., 2012. Strategic performance measurement in a healthcare organisation: A multiple criteria approach based on balanced score card. Omega, 40(1), pp.104-119.
Kaplan, R.S. and Norton, D.P., 1995. Putting the balanced scorecard to work. Performance measurement, management, and appraisal sourcebook, 66(17511), p.68.
LeRoux, K. and Wright, N.S., 2010. Does performance measurement improve strategic decision making? Findings from a national survey of non-profit social service agencies. Non-profit and Voluntary Sector Quarterly, 39(4), pp.571-587.
Micheli, P. and Manzoni, J.F., 2010. Strategic performance measurement: Benefits, limitations and paradoxes. Long Range Planning, 43(4), pp.465-476.
Niven, P.R., 2011. Balanced scorecard: Step-by-step for government and non-profit agencies. John Wiley & Sons.
Nooraie, M., 2012. Factors influencing strategic decision-making processes. International Journal of Academic Research in Business and Social Sciences, 2(7), p.405.
Nudurupati, S.S., Bititci, U.S., Kumar, V. and Chan, F.T., 2011. State of the art literature review on performance measurement. Computers & Industrial Engineering, 60(2), pp.279-290.
Poister, T.H., 2010. The future of strategic planning in the public sector: Linking strategic management and performance. Public Administration Review, 70(s1).
Soltanizadeh, S., Abdul Rasid, S.Z., Mottaghi Golshan, N. and Wan Ismail, W.K., 2016. Business strategy, enterprise risk management and organizational performance. Management Research Review, 39(9), pp.1016-1033.
Tayler, W.B., 2010. The balanced scorecard as a strategy-evaluation tool: The effects of implementation involvement and a causal-chain focus. The Accounting Review, 85(3), pp.1095-1117.
Upadhaya, B., Munir, R. and Blount, Y., 2014. Association between performance measurement systems and organisational effectiveness. International Journal of Operations & Production Management, 34(7), pp.853-875.
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